SHANGHAI, Mar. 26 (SMM) – SHFE 1306 aluminum contract prices opened slightly higher at RMB 14,750/mt on Monday. The contract gave back some gains in early morning session, and later stagnated near RMB 14,735/mt. Shorts increased slightly at the tail of trading. Finally, the most active SHFE aluminum contract closed at RMB 14,725/mt, up RMB 25/mt or 0.17%. Positions increased 754 lots to 93,912 lots, while trading volumes were a mere over 6,000 lots on thin trading activity. SHFE aluminum for June delivery should fluctuate between the 5-day and 10-day moving average in the near term.
Spot aluminum was mainly traded at RMB 14,540-14,560/mt in Shanghai on Monday, a discount of RMB 70-90/mt over SHFE 1304 aluminum contract prices. Low-iron aluminum was trade around RMB 14,740/mt. SHFE 1306 aluminum contract prices had limited upward momentum, curtailing gains of spot aluminum prices and leaving mainstream traded prices of spot aluminum stagnant at RMB 14,550/mt. Traders in Wuxi refused to sell at low prices due to limited arrivals, but low buying interest among downstream producers and middlemen in Shanghai and Hangzhou sent aluminum prices down. In the afternoon, some traders in spot markets remained eager to sell, with offers at RMB 14,540-14,550/mt, but downstream producers and middlemen stood on the sidelines, depressing trading.
SMM aluminum price averaged RMB 14,550/mt on Monday, up from last week’s RMB 14,512/mt. Aluminum prices have been hovering above RMB 14,550/mt recently. SMM recently conducted surveys on 38 domestic aluminum ingot traders and producers.
76% of market players believe aluminum prices will continue to hover near RMB 14,550/mt this week. Worries over the Cyprus debt crisis temporarily eased on Monday, pushing the US dollar index down and sending commodity prices up slightly. As such, LME aluminum has found support at USD 1,950/mt, helping aluminum prices resist declines. On the other hand, slow growth in spot aluminum consumption in China and growing oversupply pressure will keep aluminum prices in check. In this context, SHFE 1306 aluminum contract should struggle at RMB 14,750/mt and spot aluminum prices will remain stable above RMB 14,500/mt.
11% of market players are confident that aluminum prices will rise and test resistance at RMB 14,600/mt this week. The US dollar index has fell back to near 82 from 83, providing upward momentum to commodity prices. A rebound in manufacturing PMI from China and the US has boosted market confidence and will send LME aluminum up to USD 2,000/mt. SHFE 1306 aluminum contract should challenge resistance at RMB 14,800/mt, which will help drive spot aluminum prices up.
The remaining 13% of market players are bearish towards aluminum prices this week for two reasons. First, Cyprus has only gotten rid of default for now, and protests from citizens in the country indicate that there are still many uncertainties over the European debt crisis. This will keep LME aluminum in check under USD 1,950/mt. Second, traders will be anxious to sell for cash, but downstream producers will be little interested in buying as liquidity crunch bit in at the quarter’s end, dragging spot aluminum prices down to RMB 14,500/mt. Prices of the most active SHFE aluminum contracts are expected to struggle at RMB 14,700/mt.